Xiaomi's weak debut portends trouble for imminent HK tech listings

11 July, 2018, 12:41 | Author: Rickey Flowers

Today, July 9, was the first day for Xiaomi on the Hong Kong Stock Exchange, with the stock closing at $2.14, giving the Chinese smartphone manufacturer a valuation of almost $50 billion, though it should be noted that this is half the market capitalization of $100 billion that was expected from the IPO.

After pricing 2.18 billion shares at HK $17 ($2.17) per share, the low end of its expected range, Xiaomi (1810.HK) dropped quickly to HK $16 per share. By the noon lunch break, the price recovered to HK$16.98 per share, before closing at HK$16.8, a loss of 1.2%, on trading volume of $979 million (HK$7.68 billion).

Some institutional investors saw bids for the Chinese smartphone maker's shares as low as HK$15.20 (S$2.63) on Thursday with no offers in grey-market trading, according to two people familiar with the matter. Following the deduction of fees and expenses, Xiaomi said it raised around HK$23.97 billion ($3.05 billion).

Founded in 2010 by entrepreneur Lei Jun, Xiaomi has grown from a start-up in Zhongguancun - China's "Silicon Valley" - to become the world's fourth-biggest smartphone vendor at the end of past year, according to International Data Corp. "What we will be doing is to focus on the long-term growth of our business", Lin Bin, Xiaomi's president and co-founder, told CNBC on Monday.

After a sizzling 2017, Hong Kong's tech listings are now struggling.

"The share was priced at a very high valuation multiple, substantially higher than its global peers".

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Enthusiasm for Xiaomi may have waned because investors are holding out for other big Chinese tech IPOs on the horizon, Hong said.

Let us know in the comments if you think Xiaomi will do well in the medium and long term in terms of its stock price.

Xiaomi's IPO comes days after the United States and China began a trade war that has seen each nation imposes billions in tariffs on the other.

However, Lin suggested that the kind of company Xiaomi was being categorized as was of little importance: "I don't know how to call us".

And while markets still expect Xiaomi to eventually offer CDRs, there's a split in opinion on when that will happen.

However, no confirmed date has been put up by the company yet.

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